Cigarette-maker British American Tobacco (BAT) is cashing in on the increasing popularity of vaping and heated tobacco products.
Bosses at the company behind Benson & Hedges, Lucky Strike and Dunhill said sales from its e-cigarette division will rise between 30% and 50% this year, although they added that traditional cigarettes are still an important part of the business.
But despite the positive noises, BAT shares fell nearly 5% to 2,918p in early trading on Wednesday.
Chief executive Jack Bowles, who took the top job earlier this year, said: “We are creating a stronger, simpler business and driving a step change in new categories, built on the foundation of a strong combustible business.”
He added that traditional cigarette sales are performing well in a declining market, thanks to “good pricing”, which will help total sales for BAT rise between 3% and 5%.
But the primary focus for the business is on its vaping and heated tobacco products, which bosses hope will generate £5 billion in sales by 2023.
The company said its Vype vape has performed strongly in the UK and France, with a 6.8% and 12.1% market share respectively.
Its EPOK and LYFT edible nicotine products are also growing in popularity in Scandinavia and Switzerland, with Velo being rolled out in the US later this year.
BAT is playing catch-up with its peers, who moved into the tobacco-free market much quicker.